September 24, 2015

Submitted via: e-ORI@dol.gov

Office of Regulations and Interpretations

Employee Benefits Security Administration

Room N-5655

U.S Department of Labor

200 Constitution Avenue NW

Washington, DC 20210

Office of Exemption Determinations

Employee Benefits Security Administration

Suite 400

U.S Department of Labor

200 Constitution Avenue NW

Washington, DC 20210

Re: Proposed Conflict of Interest Rule [RIN-1210-AB32]

Re: Best Interest Contract Exemption [D-11712, ZRIN 1210-ZA25]

Ladies and Gentlemen:

AARP appreciates the opportunity to respond to the written comments and oral 

testimony previously provided to the Department of Labor (the Department) on the 

proposed regulation relating to the definition of a fiduciary under 29 CFR §2510.3-211

and the proposed Best Interest Contract Exemption. To better reflect changes in our 

retirement system, the proposed regulation updates the definition of who is a fiduciary 

as a result of providing investment advice for a fee to retirement investors. The 

proposed Best Interest Contract Exemption would provide conditional relief for financial 

entities that are fiduciaries by reason of the provision of investment advice to receive 

 

1 AARP is the largest nonprofit, nonpartisan organization representing the interests of 

Americans age 50 and older and their families. Nearly half of our members are employed full or 

part-time, with many of their employers providing retirement plans. A major priority for AARP is 

to assist Americans in accumulating and effectively managing adequate retirement assets to 

supplement Social Security. The shift from defined benefit plans to defined contribution plans 

has transferred significant responsibility to individuals for investment decisions that will directly 

impact the adequacy of the assets available to fund future retirement needs. 
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compensation when participants and beneficiaries, IRA owners, and small plans 

purchase, hold or sell investment products in accordance with the fiduciaries’ advice. 

The Department proposed this class exemption in connection with the publication on the 

same date of its proposed regulation updating the definition of who is an investment 

advice fiduciary under the Employee Retirement Income Security Act (ERISA). 

AARP submits the following reply comments on the proposed regulation and class 

exemption:

Proposed Conflict of Interest Rule

1. The Current Regulation Conflicts With Plain Text Of The Statute.

AARP believes that the current 1975 regulation does not derive from ERISA’s statutory 

language. Section 3(21)(A)(ii) provides that anyone who provides investment advice for 

a fee or other compensation, direct or indirect, with respect to any moneys or other 

property of the plan shall be considered a fiduciary. The Department’s initial 

interpretation is unduly narrow, and given changes in the retirement plan landscape, 

now falls woefully short of ERISA’s main purpose of protecting participants and 

beneficiaries from conflicts of interest by plan service providers. The 1975 regulation’s 

five-part test effectively insulates many advisers from any harm to plans resulting from 

imprudent and/or disloyal advice. The significantly changed investing environment 

demands a different interpretation of section 3(21)(A)(ii) that AARP believes more 

closely follows the statutory definition and purposes of fiduciary duty.

2. The Department Has The Authority To Establish New Standards For 

Retirement Plan Advisers.

Some commenters have argued that the Department lacks the authority to establish 

new standards for broker-dealers and other retirement plan advisers, and that the 

authority rests with the Securities and Exchange Commission (SEC) as a result of the

Dodd-Frank legislation. AARP strongly suggests that the Department reject this 

argument for a number of reasons. First, the securities laws and ERISA operate 

pursuant to different statutory requirements and often affect a different universe of 

entities. Although ERISA impacts broker-dealers and registered investment advisers 

who elect to provide services to plans, the breadth of ERISA’s jurisdiction extends to a 

wider variety of other service providers and fiduciary relationships with plans not under 

the SEC’s jurisdiction. Any service provider that renders investment advice to a plan, as 

described in the proposed rule, would be a fiduciary regardless of the type of services it 

provides or the fact that it may be subject to another regulatory scheme by a Federal, 

state or local authority. Second, service providers to plans are not entitled to rules 

under ERISA that are necessarily the same as the rules promulgated by the SEC. As 

noted in AARP’s initial comments on the proposed rule, ERISA plays a crucial role in 

ensuring the protection of retirement funds subsidized by taxpayers so that participants 

have sufficient assets for a secure and adequate retirement. No similar taxpayer 

subsidy underwrites investments made outside a retirement plan. Rather than 
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abdicating the authority to define fiduciary to a federal agency operating under a 

different statutory regime, as some commenters have suggested, AARP believes that 

the more sensible approach is for the agencies that directly or indirectly impact brokerdealer activities to cooperate and coordinate with each other on related but distinct 

issues. 

3. The Definition Of Fiduciary Under Section 3(21)(A)(ii) Of ERISA Includes 

Payment For Provided Advice And For Execution.

The definition of fiduciary investment advice requires the payment of “a fee or other 

compensation, direct or indirect, with respect to any moneys or other property of such 

plan.” AARP believes that “direct or indirect” in the fiduciary definition contemplates the 

payment of compensation that is broader in scope than that suggested by some 

commenters and captures more than a direct payment for advice provided. The 

Department has long taken the position that the receipt of a commission by a broker 

that provides investment advice to a plan satisfies the fee requirement in the statutory 

definition. See, e.g., Prohibited Transaction Exemption 84-24, 71 FR 5887, 2/3/2006. 

AARP sees no reason to revisit this issue that was resolved by DOL shortly after ERISA 

was enacted.

4. The Provision of Investment Advice Does Not Depend On Mutual 

Agreement or Understanding.

Some commenters have argued that the final rule should be modified to require, in a 

manner similar to the 1975 regulation, that the advice must be rendered pursuant to a 

mutual written or verbal agreement, arrangement or understanding. AARP continues to 

believe that the proposal correctly omits any requirement that the parties have a mutual

agreement, arrangement or understanding regarding the provision of investment advice. 

AARP believes that it would be extremely difficult for largely unsophisticated investors to 

prove that both parties accepted the same mutual agreement. Without clear proof, the 

investor has no claim against even the most fraudulent of advisers. The proposed rule 

attaches fiduciary status to an adviser with respect to whom it is understood by the 

parties that the adviser’s advice is individualized to, or that advice is specifically directed 

to, the advice recipient for consideration in making investment decisions. The 

Department also should retain the “or specifically directed to” caveat; without this 

caveat, advisers could claim many forms of advice are not “individualized.” AARP 

endorses this straightforward approach for determining fiduciary status. 

Others have suggested revisions to the proposed rule that essentially replicate the fivepart test contained in the 1975 rule but use different terminology to achieve a similar 

result. AARP believes that the proposed rule would close the loopholes under the 

current regulation which now permits financial advisers to play a significant role with 

respect to the plan’s investment portfolio and avoid liability for conflicted or imprudent 

advice. AARP urges the Department not to revisit the five-part test which now falls well 

short of ERISA’s main purpose of protecting participants and beneficiaries. 
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5. Advice Provided on Distributions Is Investment Advice.

A number of comments have argued that a distribution is not an investment, and 

therefore a recommendation to roll over plan assets is outside the scope of the statute. 

As previously noted in AARP’s comment letter dated July 21, 2015, AARP believes that 

a recommendation to take a distribution or roll over plan assets constitutes the provision 

of investment advice since the distribution recommendation is essentially a 

recommendation that the participant sell the underlying assets in his or her individual 

account or IRA. A recommendation to sell plan assets is certainly the type of advice 

contemplated by the statutory definition of fiduciary investment advice. In this regard, 

we believe the Department’s 2005 Advisory Opinion on investment advice regarding 

401(k) plan distributions - which inappropriately opened the door to this issue without 

public comment or review - is contrary to ERISA’s intent and should be withdrawn.

6. Investment Education May Permit an Asset Allocation Model to Identify All

Investments Available Under a Plan for Each Asset Category.

The decision by DOL to exclude advice or recommendations as to specific investment 

products from the investment education carve-out has drawn many negative comments 

from those who believe that providing examples of investments that fit within specific 

asset classes assists plan participants in making informed decisions about investing 

their account balances. IB 96-1 currently permits the identification of specific 

investments available under the plan as long as those specific references are 

accompanied by a statement that other investment alternatives having similar risk and 

return characteristics may be available. AARP is concerned that participants may rely 

on the identification of specific funds or investments as investment advice,

notwithstanding or without reviewing the accompanying disclosures. 

However, AARP appreciates the education value in helping participants to understand 

the investments available by asset class – assets that have already been selected by a 

fiduciary. AARP therefore supports a carve-out for investment education that permits 

the asset allocation model to identify all investments available under a plan for each 

asset category. The identification of all investments that satisfy a particular asset class 

would help participants, while at the same time reduce the likelihood that participants 

would be inappropriately “steered” to specific investment products.

Although AARP supports a revision to the investment education carve-out that would 

permit the identification of specific investments within each asset class, AARP urges 

further protections to prevent inappropriate steering (e.g., always listing “preferred” 

investments within an asset class first, since participants may rely on the identification 

of the first investment in each asset class). To the extent that the Department is 

favorably disposed to comments on the use of asset allocation models that refer to 

specific investments, AARP recommends that the Department adopt a rule that does 

not permit the investment education provider to unfairly favor certain investments, such 

as its own proprietary funds, when identifying specific investments available under a 

plan within each asset class. 
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AARP believes that one option to minimize bias in identifying specific investments is for 

the Department to require the ordering of investments based on an objective standard, 

such as the lowest total cost of each investment option or past performance over 

consistent periods of time. Another option could require the ordering of investments 

based on random order presentation models when listing investments within each asset 

class. 

AARP does not support a revision to the investment education carve-out that would 

permit the identification of specific investments to a participant in the context of an open 

brokerage window offered under a participant directed individual account plan. Under 

those circumstances, the participant does not have the benefit of an independent plan 

fiduciary who would be responsible for the selection and periodic monitoring of the 

investment options offered under the plan.

Similarly, AARP has concerns with the identification of specific investments in the 

context of providing investment education to IRA owners. In the absence of an 

independent plan fiduciary responsible for the selection and monitoring of investment 

options, and the potentially unlimited universe of investments available to an IRA owner, 

AARP believes that the Department should consider the inclusion of additional 

standards should it decide to permit education providers to identify specific investment 

alternatives for IRA owners. AARP believes that any asset allocation model used to 

provide investment education to an IRA owner that identifies specific investments must 

operate in an objective manner which can be verified by an independent third party. 

Moreover, the model should provide for a choice of investments in each class, and the 

determination of which specific investments will be used to populate each asset class 

must be based on objective considerations such as past investment performance or 

total costs. The goal should be to ensure that IRA owners are offered the best 

investments within each asset category under a particular asset allocation model.

7. Clarification Is Desirable To Determine When Call Centers Provide 

Education and Advice.

AARP is concerned with the arguments made during the comment period that call 

centers and call center personnel should not be treated as investment advice 

fiduciaries. It is AARP’s position that, to the extent that call center employees engage in 

the types of activities described in the proposed rule, there is no rational basis to 

exclude them from the scope of the regulation. However, AARP recognizes that call 

centers are often an excellent source of basic information for plan participants. AARP 

suggests that the final rule provide examples which clarify the types of information that 

can be provided by call center personnel without triggering fiduciary status. AARP 

believes that this approach is consistent with the carve-out for investment education. 

8. Examples Of Marketing Activities That Do Not Constitute The Provision Of 

Investment Advice Should Be Provided.

The proposal has drawn a number of negative comments from those who are 

concerned that sitting down for the first time with a potential plan client to discuss 
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available services, responding to requests for proposal, and the general marketing of 

services to plans and fiduciaries would constitute the provision of fiduciary investment 

advice. Certain of these commenters have posited interpretations that appear to be 

beyond the intended scope of the proposed rule. Based upon the written comments 

submitted, AARP recognizes that there are a number of language refinements and 

revisions that need to be made in order to cure potential misinterpretations and 

unintended consequences. AARP urges DOL to clarify and include examples of the 

types of normal marketing activities that DOL believes would not constitute the provision 

of investment advice. Service providers are entitled to rules that clearly delineate the 

types of marketing activities that are not captured by the proposed rule.

Proposed Best Interest Contract Exemption

1. The Department Has Authority To Issue Administrative Exemptions For 

Plans, Including IRAs.

While an Individual Retirement Account (IRA) is subject to the prohibited transaction 

provisions of section 4975 of the Internal Revenue Code, subsequent to the issuance of 

the 1975 fiduciary advice regulation, the Department was given the authority to interpret 

the prohibited transaction provisions for both the Code and ERISA. Executive Order: 

Reorganization Plan No. 4 of 1978, (92 Stat. 3790 (1978)). Included within that 

authority is the ability of the Department to issue administrative exemptions for plans 

described in section 4975(e)(1) of the Code, including IRAs. Since the effective date of 

the Reorganization Plan, the Department has exercised this exemption authority under 

the Code on many occasions to provide prohibited transaction relief for transactions 

involving IRAs on both an individual exemption basis and as part of a class exemption. 

The Department’s exercise of its exemption authority under both ERISA and the Code is 

subject to making findings that an exemption is administratively feasible, in the interests 

of the plan and its participants and beneficiaries and protective of the rights of the plan’s 

participants and beneficiaries. In order to ensure exempted relief is in the interest of the 

participants, the Department rightfully concludes that participants need an adequate 

enforcement mechanism. AARP believes the Department correctly concluded that a 

written contract between the Adviser and the IRA owner is an appropriate required precondition for the Department to make the necessary findings for relief – without such 

contract, neither the Department nor the IRA owner has any recourse against the 

Adviser for losses to the IRA that resulted from the Adviser’s conflicted advice.

Arguments have been made that the Department in the past issued exemptions 

pursuant to its authority under ERISA and the Code that have been framed in the 

“traditional manner.” AARP notes that in the last decade the variety and complexity of 

investments created by Wall Street and others in the financial services industry have 

dramatically changed. This constantly evolving investment marketplace - along with the 

evolution of the retirement landscape - demonstrates a need for administrative 

exemptions granted by the Department that are flexible and that are not necessarily 

constrained by past “precedent.” AARP believes that the Department has the authority 

under ERISA and the Code to fashion relief on an individual or class basis that is 

appropriate under the particular circumstances. 
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As a part of the exemption program administered by the Department, AARP encourages 

the Department to periodically reevaluate, and update as necessary, administrative 

exemptions in response to changed circumstances either in the financial services 

industry or the retirement community to ensure adequate participant protections.

2. The Best Interest Standard As Proposed Is Appropriate But Clarifications 

Are Desirable.

Under the Best Interest Standard, the Adviser must provide investment advice that is in 

the Best Interest of the Retirement Investor (i.e., advice that reflects the care, skill, 

prudence, and diligence under the circumstances then prevailing that a prudent person 

would exercise based on the investment objectives, risk tolerance, financial 

circumstances and needs of the Retirement Investor, without regard to the financial or 

other interests of the Adviser, Financial Institution or any Affiliate, Related Party, or 

other party). Certain commenters have suggested that “without regard to the financial 

or other interests” could be interpreted to prohibit any investment advice that takes into 

account the compensation that the Adviser will earn for providing the advice or any 

compensation that varies with an investment recommendation. AARP notes that the 

phrase “without regard to the financial or other interests of the Adviser...” tracks the 

language found in section 913 of Dodd-Frank, and is evidence of the Department’s 

coordination with the SEC. 

AARP recognizes that financial institutions are entitled to reasonable payment for

services rendered to plans. Accordingly, AARP recommends that DOL clarify in the 

final exemption the meaning of that language in the context of an Adviser complying 

with the Best Interest Standard and provide examples of its application with respect to 

appropriate reasonable compensation for the type of investment and level of investment 

features or services required. 

DOL noted in the preamble to the proposed exemption that the Best Interest Standard is 

defined to effectively mirror the ERISA section 404 duties of prudence and loyalty, as 

applied in the context of fiduciary investment advice. AARP suggests that, in order to 

avoid any confusion regarding the meaning of the best interest standard, DOL revise 

the best interest standard to explicitly incorporate the prudence standard set forth in 

section 404 of ERISA. 

As discussed earlier, the exemption is subject to the Department’s findings that the 

exemption is administratively feasible, in the interests of the plan and its participants 

and beneficiaries and protective of the rights of the plan’s participants and beneficiaries. 

The proposed exemption is designed to provide relief for the receipt of variable 

compensation by service providers subject to various requirements designed to protect 

the interests of the plan participants and beneficiaries, IRA owners and small plan 

sponsors. The focus of the exemption is on adherence by the Financial Adviser to the 

Best Interest Standard when providing investment advice to the Retirement Investor. 

AARP suggests that the final exemption provide examples which clarify the types of 

investment transactions that will satisfy the Best Interest Standard. For example, AARP 
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believes the rule should, and does, permit the sale of proprietary products. However, 

such sales must be in the best interest of the Retirement Investor, therefore, for 

example, be prudent for the individual, subject to no more than reasonable 

compensation, and be free of conflicted sales incentives. Further guidance from the 

Department on the sale of proprietary products would be helpful. Also in this regard, 

several commenters raised concerns about the application of the exemption to annuity 

products. AARP believes that guaranteed lifetime income streams can be an important 

element of retirement planning and that the proposed exemption currently provides 

accommodation for such products. AARP urges the Department to clarify its views on 

the pricing practices that could meet a Best Interest Standard. For example, if an 

Adviser recommends an annuity product from a more highly rated provider over another 

product - with identical features, but from a lower rated provider - a higher commission, 

and a higher overall cost to the participant, may meet a Best Interest Standard. AARP 

believes that in this hypothetical transaction, a higher commission for a “safer” annuity

may be justified, and would then fall within the scope of relief provided by the 

exemption. Similarly, the Department could generally clarify its view on whether two 

otherwise identical investment products for the consumer - that have identical costs to 

the consumer but come with different compensation pricing for the Adviser - could fall 

within the scope of the exemption. 

3. Simplified Point Of Sale Disclosures Should Be Provided Reasonably In 

Advance Of The Execution Of The Investment Transaction.

A number of commenters were concerned about the difficulty in incorporating point of 

sale disclosures into the interview process or when responding to an RFP. AARP 

believes that this is another example of interpretations of the disclosure requirements 

under the proposed rule that appear to go beyond DOL’s intent. Although AARP 

welcomes DOL clarification of these issues, AARP believes that it is essential that such 

disclosures be provided to the Retirement Investor reasonably in advance of the 

execution of the investment transaction in order to enable the Retirement Investor to 

have sufficient time to assess the impact of the total costs of the recommended 

investment and any limitations on the advice provided before purchase. 

Several commenters were concerned about the breadth and scope of the disclosures 

required under the proposed exemption. According to the comments, the sheer volume 

of information will prove confusing and will not assist Retirement Investors in making 

more informed investment decisions. AARP recognizes that Retirement Investors may 

not have the time or inclination to peruse a large amount of investment information. 

However, Retirement Investors need sufficient information under the proposed 

exemption in order to make informed investment choices. AARP supports a one-page 

disclosure document that is provided to the Retirement Investor reasonably in advance 

of the execution of the investment transaction. The Department already has been 

considering a summary guide that could serve this purpose. That document, written in 

plain English, would contain the most relevant information to an investor, including the 

investment goals or objectives of the investment, material conflicts, length of service of 

the manager of the fund, past performance over specified periods and the fees and 

expenses associated with the investment and any other costs such as advice, trading, 
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or surrender charges. At a minimum, the Department could require providers to 

distribute the section 408(b)(2) and 404 disclosures that providers already prepare and 

are required to provide to participants. However, given that the Department has found 

significant shortcomings with the current disclosures, it should consider publishing 

model language and formatting and/or reference existing best in class disclosures. 

AARP also suggests that the document prominently display the specific website 

address where more detailed information can be found. 

AARP believes that more detailed website disclosure is important as a readily available 

repository for important information for investors, their advocates, and government 

agencies responsible for proper oversight. Full and fair public disclosure and an 

educated consumer are the best protector of a healthy market economy. 

Under the Best Interest Contract Exemption, investment advice can be provided in 

person, through the internet, or by telephone. AARP recommends that the disclosures 

required under the proposed exemption be provided to Retirement Investors in the 

same manner as the provision of investment advice. Thus, for example, Retirement 

Investors who choose to receive investment advice through the internet would receive 

the required disclosures electronically, Retirement Investors who prefer in person 

advice would receive the disclosures in person, and Retirement Investors who receive 

investment advice by phone would receive notice of the disclosure by phone and 

receive the actual disclosures by mail (or electronically, if the customer prefers).

4. Negative Consent Of The Written Contract Requirement Could Be 

Permissible For Existing Plan And IRA Clients, But Affirmative Consent 

Should Be Required For New Clients.

Some commenters have argued that the requirement that the Adviser and Financial 

Institution enter into a written contract with the Retirement Investor is burdensome and 

should be modified to permit a unilateral contract without a requirement for a signature 

from the Retirement Investor. AARP continues to believe that a written contract signed 

by all of the parties that emphasizes the rights and obligations of such parties springing 

from the executed agreement is an important requirement of the exemption. AARP has 

also stated that the contract itself is more important than the timing of the contract (e.g., 

as long as there is proper advanced disclosure and the Best Interest Standard applies, 

the contract may be signed along with other client documents). However, AARP 

recognizes that there may be administrative hurdles associated with amending existing 

plan and IRA client contracts. Accordingly, AARP could support a revision to the 

proposed exemption which permits existing plan and IRA clients to enter into binding 

agreements with the Adviser and Financial Institution through a negative consent 

process pursuant to which the client is informed in plain English within a reasonable 

period of time of all of the terms and conditions contained therein. Investors must 

automatically be sent a copy of the contract and it should be readily available on the 

Adviser’s website.
- 10 -

AARP believes that the terms of the arrangement and the obligations of the parties must 

meet the requirements of the exemption and be the same regardless of whether the 

parties are operating pursuant to a signed agreement or one that became legally 

binding through a negative consent process. Model language should be developed by 

the Department to assist firms and ensure the contract is understandable to investors. 

In addition, the Department should state that these contracts are “other instruments 

under which the plan is established or operated” within the meaning of section 

104(b)(4). Lastly, the contract must be equally enforceable by plan and IRA clients 

regardless of the mechanism used for entering into the contract.

5. “Reasonable Compensation” Is Already A Well Established Standard. 

Under the Impartial Conduct Standards, the Adviser and Financial Institution must

affirmatively agree that they will not recommend an investment if the total amount of 

compensation anticipated to be received in connection with the purchase, sale or 

holding of the investment will exceed “reasonable compensation” in relation to the total

prudent services provided to the Retirement Investor. Several comments suggested 

that it would be difficult for service providers to demonstrate that their compensation is 

reasonable in the absence of further guidance from the Department. AARP believes 

that whether compensation is reasonable is already a well-established standard. There 

are many industry fee and product benchmarks readily available in the public domain

(e.g., Morningstar, Brightscope and the Investment Company Institute regularly and 

publicly report on industry compensation). Moreover, AARP notes that several class 

exemptions currently have a reasonable compensation requirement (e.g., PTE 84-24, 

71 Fed. Reg. 5887, February 3, 2006, and PTE 2006-16, 71 Fed. Reg. 63786, October 

31, 2006), as well as the service provider statutory exemption (i.e., section 408(b)(2) of 

ERISA). Reasonable compensation, while a standard term, is not further defined in any 

of those administrative or statutory exemptions. AARP is not aware of any concerns 

expressed by service providers regarding the reasonable compensation standard used 

in prior exemptions, and believes this accepted standard is appropriate for this 

exemption as well.

6. The Definition Of Retirement Investors And Small Participant Directed 

Plans.

Some commenters have argued that the definition of Retirement Investor should be 

expanded to include small, participant-directed plans. Currently, the definition includes 

a plan sponsor of a non-participant directed plan with fewer than 100 participants to the 

extent that it acts as a fiduciary who has authority to make plan investment decisions. 

According to the comment, the modification is necessary to preserve the services 

currently available to the small plan marketplace. AARP would not be opposed to the 

expansion of the definition of Retirement Investor to include small participant directed 

plans should the Department determine that such an expansion is protective of the 

interests of plan participants and beneficiaries. 

As the Department properly concluded in its sellers’ exemption, advisers should only be 

relieved of their statutory duties if it is clearly established that another party is actively 
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acting as the responsible fiduciary on all aspects of the transaction. It is often said that 

small retirement plans are sold, not bought, and thus, it is critical that advisers act in the 

best interest of unwary small employers and plans. The GAO has documented that 

most small employers rely on advisers and other third parties to design their retirement 

plans and often do not know that legally they are fiduciaries. Firms should not be 

entitled to market their “fiduciary” services to small employers only to disclaim all liability 

in small print buried in the final documents. Small employers, and their employees, are 

struggling to achieve a modest level of retirement security and the Best Interest 

Standard offers a fair model for all of the parties. 

7. Insurance Products With Securities Or Investments Features Should Be

Covered By The Best Interest Contract Exemption.

Some commenters have expressed concerns with the Department’s proposal to treat 

insurance products differently based upon whether the investment is a fixed insurance 

guarantee tied to life expectancy or a variable investment tied to a combination of life 

expectancy and securities market returns. As stated in our previous comments, AARP 

supports the Department’s proposed revocation of PTE 84-24 as it applies to IRA 

transactions involving annuity contracts that contain securities features (including 

variable annuity contracts) and mutual fund shares. As proposed, PTE 84-24 would 

remain available for investment advice fiduciaries to receive commissions for IRA 

purchases of insurance and annuity contracts that are not securities. 

AARP believes that the fee disclosures mandated by PTE 84-24 are substantively 

similar to the proposed section III(a) and (b) disclosures. AARP notes that variable 

annuity contracts and mutual fund shares are similar to many of the investment 

products included within the definition of “Assets” under the proposed exemption, which 

often fluctuate in value on a daily basis. This is in contrast to fixed annuity contracts, 

which offer the Retirement Investor the security of fixed payments for the life of the 

contract. 

8. Court Access Is Imperative To Protect The Rights Of Retirement Investors. 

Testimony provided during the hearing only served to heighten AARP’s concerns with 

the Department’s decision not to exclude pre-dispute binding arbitration provisions from 

the written contract with the Retirement Investor. Mandatory arbitration provisions deny 

the Retirement Investor the opportunity to seek redress through the courts for losses 

incurred. 

While the best protection for the Retirement Investor is a ban on pre-dispute mandatory 

binding arbitration provisions, the following provisions would help to mitigate some of 

the shortcomings of mandatory binding arbitration: the Arbitrator should be qualified 

and independent; the arbitration should be held in the location of the person challenging 

the action; the costs of arbitration should be borne by the entity that includes the binding 

mandatory arbitration provision in the contract; defendant’s attorney’s fees should not 

be shifted to the Retirement Investor, even if the challenge is unsuccessful; statutory 

remedies cannot be limited or altered by the contract; access to adequate discovery is 
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necessary; there must be a written record and decisions, and confidentiality 

requirements and protective orders which would prohibit the use of evidence in 

subsequent cases should be prohibited. We note that FINRA has adopted some but not 

all of these provisions. 

AARP reiterates its support for the prohibition against the waiver or qualification of the 

Retirement Investor’s right to bring or participate in a class action or other 

representative action in court in a dispute with the Adviser or Financial Institution. 

AARP appreciates this opportunity to provide its additional views on the proposed rule 

defining who is a fiduciary as a result of providing investment advice to a plan or its 

participants or beneficiaries and the Best Interest Contract Exemption. If you have any 

questions, please feel free to contact me or Michele Varnhagen of our Government 

Affairs office at 202-434-3829. 

Sincerely,

David Certner

Legislative Counsel and

Legislative Policy Director

Government Affairs